Rocket Lab (RKLB +0.39%) stock rocketed 11.2% through noon ET Monday after investment bank Stifel raised its price target on Friday.
Reports indicate that Stifel analyst Erik Rasmussen raised his estimated valuation of the New Zealand rocket-maker by more than 50%, from $9 to $15 a share, and has "high-level conviction" that Rocket Lab will succeed in bringing its new Neutron rocket to market.
NASDAQ: RKLB
Key Data Points
Neutron is (still) coming
In 2021, Rocket Lab CEO Sir Peter Beck promised that the Neutron medium-lift vehicle would begin launching in 2024. That goal probably won't be met, and at last report, Rocket Lab was targeting a mid-2025 date for its first launch. Allowing for a few last-minute tweaks, it still seems reasonable to assume Rocket Lab will get the launch off before the end of next year.
In the rockets business, a four-year span from concept to first launch would still be pretty impressive.
Rasmussen anticipates this will be a "disruptive" event, introducing new competition to a market for non-small rocket launches that's currently dominates by SpaceX, United Launch Alliance, and Arianespace in Europe, and especially into the smaller market for U.S. government launch missions.
The real reason to own Rocket Lab
Rasmussen goes on to argue that Rocket Lab looks "well positioned to capitalize on space systems momentum across a number of high-profile programs." The analyst anticipates this market could grow even faster than space launch, predicting it could eventually become a $300 billion-a-year global business.
If you ask me, this is the real reason an investor might want to own Rocket Lab stock. Rocket launching has historically been a low-margin business. And margins will get even tighter the more competitors enter the market. Rocket Lab's space systems business, meanwhile, earns gross profit margins roughly double those of its launch services business (which earns only 11%).
While other investors are ooh-ing and ahh-ing over Neutron's arrival next year, what you should really watch is the progress of Rocket Lab's satellites business.
